🚨 Stablecoin

Today Korean Social News for Beginners | 2025.10.01

0️⃣ Korean Won Stablecoin System and Financial Market Changes

📌 Korean Won Stablecoin System Speeds Up… Economic Growth vs Money Outflow Concerns

💬 Political parties are actively pushing to create a system for Korean won stablecoins. The Democratic Party sees it as a new source of economic growth and is working quickly to make it law. The People Power Party also agrees it's needed. Financial authorities have announced plans to create rules, but the Bank of Korea and Ministry of Economy are worried about foreign exchange market problems and money leaving the country. They are calling for a careful approach. Stablecoins can expand real-world use of digital assets and help the blockchain industry grow, but we need careful planning for financial stability and currency control.

💡 Summary

• A stablecoin is a digital asset designed to keep its value by linking to regular money or specific assets.
• Both the Democratic Party and People Power Party agree that we need a system for Korean won stablecoins.
• We need careful planning to balance economic growth and concerns about money leaving the country.

1️⃣ Definition

A stablecoin is a digital asset designed to keep its value by linking it to regular money or specific assets. The word combines "Stable" (steady) and "Coin" (digital money). Unlike Bitcoin or Ethereum, which change in price a lot, stablecoins try to keep their price steady.

Usually, one stablecoin equals one dollar or one won. To make this work, the company that creates the stablecoin either keeps enough backup assets or uses computer programs to control the value. Because the price stays more steady, stablecoins can be used for real things like payments, sending money to other countries, and storing value.

💡 Why Is This Important?

• Stablecoins are a key way to make digital assets useful in real life.
• They provide the foundation for blockchain-based financial services to grow.
• They directly affect national money policy and financial stability.
• They are seen as a new source of economic growth and financial innovation.

2️⃣ Current Discussions and Key Issues About Stablecoin Systems

📕 Views of Political Parties and Financial Authorities

• Both major parties agree that we need a stablecoin system. Their main positions are:

  • The Democratic Party sees stablecoins as a new source of growth and is working quickly on laws.
  • They emphasize growing the blockchain industry and healthy development of digital asset markets.
  • The People Power Party also agrees it's needed and is working with the government to prepare laws.
  • The Financial Services Commission is preparing rules about how to issue them, backup asset requirements, and disclosure duties.
  • They plan to build a complete regulatory system through the Digital Asset Basic Act.

• The Bank of Korea and Ministry of Economy urge caution. Their main concerns are:

  • If Korean won gets converted to stablecoins, large amounts of money might leave the country.
  • The foreign exchange market could become more unstable and exchange rates could be affected badly.
  • The central bank's ability to control money supply might get weaker.
  • If we make the system too quickly without enough safety measures, it could cause financial problems.
  • They stress that we need a careful approach that matches international regulations.

📕 Types of Stablecoins and How They Stay Stable

• Stablecoins come in different types based on what backs them up. The main types are:

  • Fiat-backed stablecoins keep real money like dollars or won as backup in a 1:1 ratio.
  • Examples include Tether (USDT) and USD Coin (USDC), which are the most stable.
  • Crypto-backed stablecoins keep Bitcoin or Ethereum as extra backup (more than 1:1).
  • Algorithm stablecoins use computer programs to control supply without any backup assets.
  • Hybrid types mix different backup assets with algorithms.

• Each type has advantages and risks. The main features are:

  • Fiat-backed types are most stable but there are concerns about central control.
  • The trustworthiness of who issues them and how they manage backup assets are key.
  • Crypto-backed types are decentralized but there's risk when backup value changes.
  • Algorithm types are efficient with no backup, but can collapse quickly if people lose trust.
  • The 2022 Terra incident showed the weakness of algorithm-based stablecoins.

💡 Main Issues for Stablecoin Systems

1. Money Outflow Concerns: Korean won might be converted to stablecoins and flow overseas
2. Currency Control: When used alongside regular money, money policy becomes less effective
3. Backup Asset Management: Need enough backup and independent supervision
4. Issuer Regulations: Need to decide who can issue them - banks, securities firms, fintech, etc.
5. International Alignment: Need to design the system to match major countries' regulations

3️⃣ Expected Benefits and Concerns

✅ Economic Benefits and Industry Development

• The blockchain industry ecosystem will expand. Main benefits include:

  • Korean won stablecoins can make Korean blockchain companies more competitive.
  • Development of various services like payments, money transfers, and DeFi (decentralized finance) will increase.
  • Digital asset exchanges will have more money flowing and markets will become more active.
  • New jobs will be created and investment in related industries will grow.
  • Korea will have a chance to become a leader in digital finance.

• Financial services will become more innovative and convenient. Main changes include:

  • 24-hour real-time international money transfers will be possible at low cost.
  • Payment systems will be faster and more efficient than traditional banking systems.
  • Blockchain-based loans, deposits, and asset management services will expand.
  • People without access to banking will have better access to financial services.
  • Transparent transaction records will improve trust in financial transactions.

✅ Concerns and Response Plans

• Financial stability and currency control issues are raised. Main concerns are:

  • If large amounts move to stablecoins, bank deposits could decrease.
  • Money leaving the country could increase exchange rate changes and reduce foreign reserves.
  • If dollar stablecoins become dominant, the Korean won's status could weaken.
  • The central bank's ability to control money supply could be limited, reducing policy effectiveness.
  • During financial crises, rapid movement of money to stablecoins could increase instability.

• We need thorough safety measures. Main plans include:

  • Issuers must keep enough backup assets and receive regular audits.
  • Independent supervisors must check backup ratios and liquidity in real-time.
  • Issue amounts should grow step by step to minimize market shock.
  • We must follow international standards like Travel Rules to prevent money laundering.
  • We need deposit protection systems and dispute resolution procedures to protect users.
  • We need close cooperation with the Bank of Korea on foreign exchange management and money policy.

4️⃣ Related Terms Explained

🔎 Terra Incident

• A key example showing the weakness of algorithm stablecoins.
  • The Terra incident refers to the collapse of Terra (UST), an algorithm stablecoin issued by Korea's Terraform Labs in May 2022, which shocked the global digital asset market. Terra was designed to maintain a $1 value through a price-linking algorithm with its sister coin Luna, without any backup assets.
  • How the incident happened: First, large Terra sales caused the price to drop below $1, shaking market trust. Second, the recovery algorithm started working and Luna was issued infinitely, causing its value to crash. Third, this cycle repeated and both coins lost almost all value. Fourth, investors lost about 40 trillion won.
  • After this incident, major countries started strengthening stablecoin regulations. Concerns especially grew about algorithm stablecoins without backup, and discussions began about requiring enough backup assets and transparent disclosures. In Korea too, this incident led to stronger digital asset regulations.

🔎 Reserve Asset System

• A key mechanism to guarantee stablecoin stability.
  • The reserve asset system requires stablecoin issuers to hold safe assets equal to the amount they issue. This ensures that issued coins can be exchanged for regular money at any time.
  • Main requirements include: First, reserve assets must be at least 100% of the issued amount. Some countries require even higher ratios. Second, reserve assets must be safe and liquid, like cash, short-term government bonds, or certificates of deposit. Third, they must receive regular audits from independent accounting firms. Fourth, they must transparently disclose their reserve asset status.
  • Without a proper reserve asset system, investors can be harmed when issuers go bankrupt or become insolvent. Therefore, regulators in each country try to clearly specify by law the types of reserve assets, how to store them, and audit frequency. This is also one of the key issues in creating a Korean won stablecoin system.

🔎 Travel Rule

• An international regulation that increases transparency in digital asset transactions.
  • The Travel Rule requires that when trading digital assets, sender and receiver information must be sent together to prevent money laundering. Countries have been adopting it since the Financial Action Task Force (FATF) recommended it in 2019.
  • Main content includes: First, for digital asset transactions above a certain amount, information like names, addresses, and account numbers of senders and receivers must be sent. Second, digital asset businesses must keep this information and provide it when authorities request. Third, the same applies to cross-border transactions. Fourth, violations can result in fines or business suspension.
  • Korea has been implementing the Travel Rule since 2022 through amendments to the Act on Reporting and Using Specified Financial Transaction Information. Digital asset exchanges have built systems to exchange information for transactions over 1 million won. Stablecoins are classified as digital assets so they will face the same regulations. This is an important mechanism to block illegal money flows and increase transaction transparency.

🔎 Currency Sovereignty

• The right of a nation to independently issue and manage its own money.
  • Currency sovereignty means a nation's power to issue its own money and independently establish and implement money policy. This is a core element of national economic sovereignty and provides the foundation for central banks to promote economic stability and growth through interest rate adjustments and money supply management.
  • Stablecoin-related currency sovereignty issues include: First, if dollar stablecoins are widely used domestically, the Korean won's status could weaken. Second, if large amounts of money convert to stablecoins, the central bank's money policy effects could be limited. Third, regulating stablecoins issued by foreign companies is difficult and could threaten financial stability.
  • Because of these concerns, many countries are pushing to create systems for stablecoins based on their own currency. A Korean won stablecoin could expand international use of the Korean won and protect currency sovereignty. However, without proper regulation and supervision, it could cause financial instability, so a careful approach is needed.

5️⃣ Frequently Asked Questions (FAQ)

Q: How are stablecoins different from Central Bank Digital Currency (CBDC)?

A: There are fundamental differences in who issues them, their purpose, and how they're regulated.

• Stablecoins are digital assets issued by private companies or groups, while CBDC is digital money issued directly by the central bank. First, stablecoins are private payment methods using blockchain technology, backed by the issuer's trust and backup assets. Second, CBDC is legal money guaranteed by the government with the same legal status as cash or deposits. Third, stablecoins are mainly used for digital asset trading, international transfers, and DeFi services, while CBDC is meant as a general payment method to replace cash.
• There are also regulatory differences. Stablecoins are regulated by financial authorities but run independently by private entities, while CBDC is directly managed by the central bank and used as a tool for money policy. The two systems can complement each other, and many countries are examining both together.

Q: If Korean won stablecoins are introduced, how will it affect individual investors?

A: Digital asset trading will become more convenient and you'll be able to use new financial services.

• Korean won stablecoin introduction will bring several changes for individual investors. First, you can trade faster and cheaper using Korean won stablecoins on digital asset exchanges. Previously, depositing and withdrawing Korean won was complicated, but with stablecoins you can trade 24 hours instantly. Second, accessing overseas exchanges and DeFi platforms becomes easier. You can use Korean won stablecoins directly without converting Korean won to dollar stablecoins. Third, opportunities to use new financial products like blockchain-based loans, deposits, and asset management services increase.
• However, there are things to be careful about. Stablecoins are also digital assets, so there are risks from issuer insolvency or market changes. You must use coins from trustworthy issuers and pay special attention to security. You should also check tax-related regulations.

Q: Is investing in stablecoins safe?

A: More stable than regular cryptocurrencies, but not completely safe.

• Stablecoins have less price change, which is good, but several risk factors exist. First, the issuer's trustworthiness is most important. You need to check if they hold enough backup assets and receive regular audits. Well-established stablecoins like Tether or USD Coin are relatively safer. Second, algorithm stablecoins are especially risky. As the Terra incident showed, they can collapse rapidly if people lose trust. Third, there are risks from regulatory changes. If the government bans or restricts certain stablecoins, losses can occur.
• To use them safely, you should do the following: Choose fiat-backed stablecoins, trade on major exchanges, don't hold large amounts long-term, and regularly check official audit reports. Most importantly, remember that their original purpose is as a payment or transfer method, not for investment.

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